Everything employees need to know about redundancy settlement agreements
Redundancies have sadly become a part of modern life: uncertain economic conditions, along with shifts away from traditional industries such as manufacturing and steel, have resulted in major shifts in working patterns and, at times, significant numbers of job losses.
When redundancies do occur, they will sometimes involve the offer of settlement agreements to employees – this blog will explain what a settlement agreement is, and what you should do if offered one.
It can be a daunting process, which by its nature arrives at a very stressful time. However, it can also be an opportunity to negotiate the best possible redundancy package for yourself – seeking advice from a reputable law firm can help you to achieve that.
Here is the Browell Smith & Co guide to what you need to know if you’re presented with a settlement agreement.
What are settlement agreements and when are they used?
Settlement agreements came into force in 2013. They’re legally binding agreements that set out the full terms of a settlement between an employer and an employee.
A settlement agreement prevents employees from suing their former employer, usually after they have received a sum of money in return for agreeing not to bring certain claims against their employer.
Redundancies do not always lead to settlement agreements. Employers who believe they have conducted a fair process may decide to proceed to dismiss an employee without any kind of exit package.
If the redundancy is fair, employers need not pay any more than statutory redundancy pay unless a contractually binding policy is in place which sets out the amount to be paid.
However, many employers offer a settlement with an enhanced redundancy payment in order to ensure the employee makes a smooth exit from the business, and also to protect themselves against any claims.
What do settlement agreements mean?
Each settlement agreement will vary but usually the documents include sections that deal with the claims to be settled, the payments to be received and the relevant tax issues, and a confidentially/gagging clause, and any agreed reference from your employer.
When you sign a settlement agreement, your employment is terminated. You’ll typically receive a sum of money in return for losing your job and certain employment rights.
There are specific requirements for a settlement agreement to be binding, which you can read more about on our settlement agreement page here.
You’ve been offered a settlement agreement – what should you do?
- Stay calm and write everything down
There’s every chance your heart will be racing if you’ve been called into an office and told you’re being made redundant. It can be difficult to remember everything that is said, but bear in mind there is no pressure on you to make a decision straight away.
Don’t be afraid to ask questions, and write down everything that you can remember about what was said, as soon as you possibly can.
- Get advice
It’s a legal requirement that you get advice from a qualified professional. A settlement agreement will only become binding once you have received independent legal advice on it.
A good employment solicitor can help you consider whether you’re getting a good deal and whether you have any grounds for a claim against your employer – such as discrimination or unfair dismissal.
Your employer might recommend a solicitor to you, but you are free to choose your own. In either case, your employer is required to pay the solicitor fees for you.
- Make a decision
Making a decision is the hardest part. If you don’t sign the agreement, then you preserve your full rights to make a claim against your employer.
To decide whether an agreement is a good deal, you need to consider why you’re being offered the agreement and what rights you are being asked to waive as a result of you signing.
A lawyer can also help you negotiate a better deal, which may include a bigger pay-out. If you’re facing a period of unemployment, you need to be able to meet your household living expenses until you get another job. One of the considerations you need to make is whether the money that’s being offered is enough.
However, that will draw out the process, and it may be more stressful in the long-run. Your solicitor will advise you on the likely outcomes of each possible course of action and make recommendations for how to proceed.
Never be afraid to ask your solicitor questions about any part of the process – they are there to help you.
You can read this page for more information about settlement agreements, and how to appoint Browell Smith & Co as your solicitor.
Please note that this blog should be used as a general guide only. The advices given do not relate to special circumstances and we strongly recommend that you discuss your circumstances further with us.Back to News